Private Equity Is Shaping The Future Of The NBA

Last month private equity billionaire Tony Ressler won his bid to purchase the NBA’s Atlanta Hawks for $850M. This acquisition is the latest instance of private equity entering the NBA, and it raises interest and concern over how this trend will impact the future of the league.

It all began back in 2002 when a group led by Bain Capital’s Steve Pagliuca and Wyc Grousbeck of Highland Capital Partners acquired the Boston Celtics for $380M. Since then the Golden State Warriors, Toronto Raptors, Detroit Pistons and Philadelphia 76ers were bought by groups or individuals tied to private equity or venture capital. Now, with the addition of the Atlanta Hawks, private equity occupies a significant portion of ownership in the league.

Ressler’s group, which includes retired NBA superstar Grant Hill, was previously unsuccessful in their bid for the Los Angeles Clippers after allegations of racism pushed long-time owner Donald Sterling out of the owner’s box.

The Brooklyn Nets are another team rumored to be up for sale. In a time of sky-high franchise valuations, the Nets are said to be worth about $1.3B according to valuations expert Peter Schwartz. To put that number in perspective, current owner Mikhail Prokhorov bought the team in 2010 for $220M.

Those steep valuations do not appear to be a deterrent to the buying trend, as TPG Capital founder David Bonderman is said to have interest in buying the team.

While the spike in valuations is fascinating to a mergers and acquisitions advisor like myself, the majority of fans are likely more concerned with how private equity ownership will impact the game and overall fan experience.

ATLANTA, GA - APRIL 29: Antony Ressler, future Atlanta Hawks owner pending league approval, stands on the sidelines prior to Game Five of the Eastern Conference Quarterfinals of the 2015 NBA Playoffs between the Atlanta Hawks and Brooklyn Nets at...

In the case of the Celtics, their private equity ownership group took on a franchise that had suffered through a six-season playoff drought from 1995 to 2001. They eventually turned them into perennial contenders after luring All Stars Kevin Garnett and Ray Allen to a team that already had a franchise star in Paul Pierce. The Celtics’ “big three” delivered a championship during their inaugural season in 2008, and they returned to the Finals in 2010 where they fell to the Los Angeles Lakers in a thrilling series that went all seven games.